Buying Car Insurance? Avoid These 5 Mistakes
When buying car insurance, many people think they know what they’re doing, but are unaware of some of the misconceptions they hold that may lead to some serious mistakes. This is particularly true when buying coverage without professional guidance. Your agent is a great resource in helping you avoid the following five common mistakes made when buying auto insurance.
Assuming state minimum liability limits are sufficient: Everyone likes to save money, but you need to balance that with ensuring you are getting adequate protection. State minimums are not enough. For the extra, say, $10 you save by paying only for state minimum coverage, you may risk being underinsured and facing $300,000 in out-of-pocket costs as a result.
Raising deductibles to $1,000 to save $10: Unless you’re a high-risk driver who is paying thousands of dollars for full coverage, increasing your deductibles – particularly comprehensive deductibles – won’t pay. Reserve that major choice in case you should have a major violation or a series of accidents and tickets.
Leaving out information about household drivers: Sometimes you just don’t think: You might believe you can save by not mentioning household drivers who would likely generate higher premiums. In fact, you’re actually opening yourself up to denied claims or a felony charge for insurance fraud.
Buying collision coverage for a 10-year-old car: Unless it’s a stated value classic or custom car, you don’t need to pay full coverage for damage to your vehicle. Effectively, you may be paying more in premiums than the car’s worth. The best rule of thumb: Once annual premiums for full coverage are over 10 percent of current value, drop your collision coverage.
Not insuring custom parts or modifications: If you’ve sunk $10,000 on rims, tinted windows, top-of-the-line stereo systems and chrome, you need to protect your investment. Some policies may cover up to $2,500 in custom parts, but that’s obviously insufficient.